Bill of Supply vs Tax Invoice

Bill of supply vs tax invoice

A bill of supply is the document a registered person issues instead of a tax invoice when no GST is being charged — principally for exempt supplies and by taxpayers registered under the composition scheme. It carries no tax amount and confers no input tax credit on the recipient, which is the practical difference that matters.

When each is used

A tax invoice is issued for a taxable supply and carries the tax. A bill of supply is issued where the supply is exempt or where the supplier is under the composition scheme and cannot charge tax. Issuing the wrong one is not a formatting error.

What it must contain

Much of what a tax invoice contains — the supplier’s identity and GSTIN, a consecutive number, the recipient’s details, a description with HSN or SAC, and the value — but no tax rate and no tax amount.

Composition dealers

A composition taxpayer pays tax at a flat rate on turnover and cannot collect tax from customers, so they issue bills of supply and are generally required to state on them that they are not eligible to collect tax.

The consequence of getting it wrong

Issuing a bill of supply for a taxable supply means tax that should have been collected was not — a liability that remains yours. Issuing a tax invoice for an exempt supply means charging tax that was never due.

Can a bill of supply be used to claim input credit?

No. It carries no tax, so there is nothing to claim. That is the single most important practical difference between it and a tax invoice.

Can one document cover both taxable and exempt supplies?

Where a supplier issues a document covering both, an invoice-cum-bill-of-supply may be used. Keeping them separate is usually simpler to administer.

Do composition dealers issue tax invoices?

No. They cannot collect tax from their customers, so they issue bills of supply, generally stating that they are not eligible to collect tax on supplies.